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Alongside the millions of people who managed to successfully claim Universal Credit at the start of the COVID-19 pandemic, there were a further half a million people who, despite having suffered a loss of over 10% of their income, found they were ineligible for support.

Our previous blog focused on people who failed to take up their entitlements, whereas this other group could not claim because their wider circumstances (in most cases having a working partner or existing savings) restricted their eligibility. However, many still experienced significant financial strain, with important implications for their physical and mental health.

Most of this group were employees who were still in work, or self-employed people, with reduced pay or hours, and some receiving furlough payments. But the scale of the income shock, combined with many of their outgoings (like bills, housing costs, existing loans) remaining the same, meant that around 50% of these people reported poor mental health, and 40% reported severe financial strain. This strain was reflected in falling behind on household bills or being unable to afford fresh fruit and vegetables. For instance, 70,000 people reported having skipped meals in the fortnight after they found they were ineligible for benefits.

Income shocks such as unexpected job losses or reductions in hours aren’t just a feature of the pandemic. In the normally functioning UK labour market, transitions from employment to unemployment and back again are frequent and might not last for very long – but affected workers can still experience intense financial insecurity. The pandemic created a scenario where many people were affected at once, prompting greater awareness of how the current welfare system works and its shortcomings. It has also shown the need for better evidence of how family incomes can change throughout the year, and the consequences of that change.

The financial strain that millions experienced, despite the furlough scheme and the Universal Credit uplift of £20 per week, has highlighted that many families are in a precarious position – and that this is not just the poorest families. 28% of adults were financially squeezed with their incomes falling by more than their spending by September 2020.

The experience of the pandemic has shown the positive role that a differently structured system of social security could play in supporting public health. A more generous level of earnings replacement for individuals, similar to the approach of the furlough scheme, could help alleviate short-term periods of financial strain and uncertainty (which can damage mental health).

In the short term, it is important to maintain the Universal Credit uplift (there is broad public support for making it permanent) and to ensure that people who are eligible can claim easily. This is all the more critical given the potential rise in unemployment this autumn, as well as the long duration of financial pressure some have experienced, with debts taken on to cover shortfalls by some. There are also some potential quick fixes to expand eligibility for social security, such as introducing a second earner allowance into Universal Credit or suspending capital rules that are applied to savings.

In the longer term it should be a priority to ensure that the social security system protects against insecurity experienced in the labour market and provides an adequate income to support good health. To better protect mental health, which we know is negatively influenced by financial vulnerability, it will be vital to consider new social security measures that provide support to those who need it – even if for a short period of time to prevent financial strain.

David Finch (@davidfinchthf) is a senior fellow in the healthy lives team at the Health Foundation.

Heather Wilson (@heathers_health) is a policy and programme officer in the healthy lives team at the Health Foundation.

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